GIFT  OF 


Contents 

1  Memorial  showing  the  wants  of  the  University. 

1875. 

2  Same  *  1875-1876. 
5   Same.  1877-78. 

3a  Report  of  the  Regents  to  the  Constitutional  cor 

4  Report  of  Commission  to  examine  into  and  report 

condition  of  certain  funds,  etc.  in  relation 
State  university,  1879. 

5  Memorial  of  the  Regents  on  the  wants  of  the  Ui 

Dec. 31,  1880. 

6  .game.  Feb.  3,  1880. 

7  Memorial  to  Congress  (regarding  investment  of  n 

derived  from  sale  of  lands  donated  by  Congrei 
28,  1882. 

8  Report  of  Law  committed  of  the  Regents  on  the  t 

Congress  of  July  2,  1862.    Wfc^  , 

9  University  of  California  rneeds3  Jan.l,  1885. 

10  Senate  bill  No.  49.  Jan  18.  1887.  An  act  to  pr< 

for  the  permanent  support  of  tve  University. 

11  Reasons  for  supporting  bill  to  provide  for  the 

manent  support  of  the  University.  Jan.  1887» 

12  Communication  regarding;  funds  for  Experiment  s1 

Dec.  6,  1887. 

13  Report  of  the  specie 1  committee  on  the  Morrill 

aid  act.  Mar.  1891. 

» 

14  Appeal  to  the  Alumni  of  the  University  by  a  Cor 

on  legislation  ap-ointed  by  the  Regents  to  ai 
interest  in  securing  funds  for  t^e  University 
25,  1894. 

15-  Legislative  bills.  Jan.  1887,  for  appropriatioi 

17  |250,000  for  buhdings. 

18  Report  of  Committee  on  ways  and  means.  May  20, 

19  Report  on  establishment  of  fee  for  incidentals* 


& 


UNIVERSITY  OF  CALIFORNIA. 


REPORT 


LAW    COMMITTEE 


BOARD  OF  REGENTS 


ACT  OF  CONGRESS  OF  JULY  2,  1862. 


SACRAMENTO: 

JAMES  J.  AYERS, SUPT.  STATE   PRINTING. 

1883. 


UNIVERSITY  OF  CALIFORNIA. 


REPORT 


LAW    COMMITTEE 


BOARD  OF  REGENTS 


ACT  OF  CONGRESS  OF  JULY  2,  1862. 


SACRAMENTO: 

JAMES  J.  AYERS, SUPT.  STATE  PRINTING. 

1883. 


REPORT, 


MR.  PRESIDENT:  An  inquiry  has  been  made  of  the 
Law  Committee  as  to  whether  in  their  opinion  the  funds 
derived  to  the  University  under  the  Act  of  Congress  of 
July  2,  1862,  may  now  be  lawfully  invested  in  securi- 
ties other  than  the  stocks  of  the  United  States,  or  of 
the  States,  or  some  other  stocks  supposed  to  be  reliable, 
and  yielding  not  less  than  five  per  cent  upon  their  par 
value,  as  prescribed  in  that  Act. 

At  the  time  of  its  passage  the  money  markets  of  the 
country  were  overflowing  with  securities  of  the  char- 
acter therein  mentioned,  and  no  material  financial  change 
would  seem  to  have  been  then  anticipated. 

But  now  it  is  understood  to  be  the  case  that  there  are 
not  to  be  found  in  the  money  market  any,  or,  at  all 
events,  a  sufficient  amount  of  stocks  of  the  prescribed 
character  in  which  the  funds  of  the  University  may  be 
invested  so  as  to  produce  the  yield  required  by  the  Act. 
There  are  certainly  no  United  States  securities  of  such 
a  character  to  be  obtained,  and  in  California  there  are 
practically  no  such  State  securities  outstanding,  or,  at 
all  events,  but  a  very  small  amount  of  such  securities  ; 
and  the  Finance  Committee  are  unable  to  obtain  the 
securities  required  by  the  Act  of  Congress  upon  the 
terms  it  has  prescribed.  In  the  meantime  a  consider- 
able portion  of  the  funds  of  the  University  have  been 
awaiting  a  proper  investment,  and  in  a  comparatively 


short  time  the  greater  portion  of  the  entire  donation 
must  be  in  a  like  situation,  and  no  investment  of  it  can 
be  legally  made  if  the  provisions  of  the  Act  of  1862 
as  originally  enacted  are  to  be  adhered  to  on  the  part 
of  the  State  authorities. 

In  view  of  this  condition  of  things,  it  would  appear 
that  on  the  third  of  March  last  the  Congress  of  the 
United  States,  by  an  Act  approved  on  that  day,  pro- 
posed to  those  States  of  the  Union  not  having  the 
outstanding  securities  contemplated  by  the  Act  of  July 
2,  1862,  a  new  scheme  of  investment  of  these  funds, 
by  which  proposal  such  investments  were  no  longer  to 
be  confined  to  the  class  of  securities  theretofore  pre- 
scribed, but  might  be  made  "  in  any  other  manner " 
deemed  advisable  by  the  authorities  of  the  State  acced- 
ing to  the  proposed  change.  Some  four  days  after  the 
passage  of  the  Act  of  Congress  last  referred  to,  to  wit : 
on  the  seventh  of  March  last,  the  State  of  California, 
by  an  Act  approved  on  that  day,  virtually  accepted  the 
proposal  of  Congress  in  that  behalf,  and,  were  it  not 
for  a  difficulty  now  to  be  suggested,  the  Committee 
would  have  little  hesitation  in  giving  an  affirmative 
response  to  the  inquiry  submitted  to  its  consideration. 

As  early  as  March  30,  1868,  the  State  of  California, 
by  a  concurrent  resolution  of  its  legislative  houses,  had 
memorialized  the  Federal  Government  on  this  subject, 
had  pointed  out  that  the  Act  of  July  2,  1862,  did  not 
permit  means  of  investment  permanent  in  their  char- 
acter, or  reliable  for  long  periods  of  time,  and  had 
requested  her  representatives  and  instructed  her  Sena- 
tors to  obtain  the  passage  of  an  Act  of  Congress  con- 
ferring upon  the  State  the  unconditional  right,  in  its 


discretion,  to  invest  this  fund  "in  unincumbered  produc- 
tive real  estate."  But  this  proposal  by  the  State  seems 
not  to  have  been  favorably  regarded  £t  Washington, 
and  the  measure  failed  of  success. 

The  Act  of  Congress  of  the  third  of  March  last, 
proposing  a  change  in  the  terms  of  the  Act  of  July  2, 
1862,  in  respect  to  investments,  was  acccompanied  by 
a  condition  therein  expressed,  by  which  any  accepting 
State  should  engage  that  the  funds  to  be  invested 
should  yield  not  less  than  five  per  centum  per  annum 
upon  the  amount  of  the  investment;  in  other  words, 
that  the  State  assenting  to  the  change  should  undertake 
upon  its  part  to  become  a  surety  or  guarantor  against 
any  loss  to  the  fund  which  might  otherwise  be  sustained 
by  reason  of  the  new  method  of  investment  proposed  ; 
and  the  Committee  are  of  opinion  that  the  Act  of  the 
Legislature  of  this  State  of  the  seventh  of  March  last, 
already  referred  to,  fairly  imports  upon  its  face  an 
assumption  by  the  State  of  the  obligation  of  suretyship 
required  by  the  Act  of  Congress,  so  far  as  the  State 
can  be  considered  under  the  provisions  of  the  present 
Constitution  to  have  been  at  liberty  to  assume  an  obli- 
gation of  that  character. 

We  are  thus  brought  to  the  consideration  of  the 
question  whether,  under  the  provisions  of  the  present 
Constitution,  adopted  in  the  year  eighteen  hundred  and 
seventy-nine,  it  is  competent  for  the  State  to  assume 
such  an  obligation. 

By  the  thirty-first  section  of  the  fourth  article  of  that 
instrument  it  is  provided  as  follows: 

"  Section  31.  The  Legislature  shall  have  no  power 
"  to  give  or  to  lend,  or  to  authorize  the  giving  or  lend- 


"  ing  of  the  credit  of  the  State  in  aid  of,  or  to  any  per- 
"  son,  association,  or  corporation,  whether  municipal  or 
"  otherwise,  or  to  pledge  the  credit  thereof  in  any  man- 
"  ner  whatever,  for  the  payment  of  the  liabilities  of  any 
"  individual,  association,  municipal,  or  other  corporation, 
"whatever,"  etc. 

This  general  provision  is  in  terms  restrained  in  its 
operation  by  a  proviso  referring  to  the  support  of 
orphans,  abandoned  children,  and  aged  persons  in 
indigent  circumstances,  under  the  provisions  of  the 
twenty-second  section  of  the  same  article,  but  does  not 
appear  to  be  otherwise  restrained  or  modified. 

Again;  section  thirteen,  of  article  twelve,  of  the 
same  instrument,  is  as  follows : 

"  The  State  shall  not  in  any  manner  loan  its  credit," 
etc.  And  this  proviso  does  not  seem  on  its  face  to  be 
qualified  or  restrained  at  all,  though  doubtless  it  is  by 
implication  qualified  by  the  provisions  of  the  twenty- 
second  section  of  article  four  in  relation  to  orphans, 
etc.,  already  referred  to. 

The  only  remaining  clause  of  the  present  Constitu- 
tion which,  in  the  opinion  of  the  Committee,  may  be 
supposed  to  bear  upon  the  question,  is  found  in  the 
ninth  section  of  the  ninth  article  of  that  instrument, 
and  which  for  convenience  of  reference  is  here  inserted 
in  extenso: 

"  Section  9.  The  University  of  California  shall  con- 
"  stitute  a  public  trust,  and  its  organization  and  govern- 
"  ment  shall  be  perpetually  continued  in  the  form  and 
"  character  prescribed  by  the  organic  Act  creating  the 
"  same,  passed  March  third,  eighteen  hundred  and  sixty- 


14  eight  (and  the  several  Acts  amendatory  thereof),  sub- 
ject only  to  such  legislative  control  as  may  be  neces- 
"  sary  to  insure  compliance  with  the  terms  of  its  endow- 
"  ments,  and  the  proper  investment  and  security  of  its 
"  funds.  It  shall  be  entirely  independent  of  all  politi- 
"cal  or  sectarian  influence,  and  kept  free  therefrom  in 
"  the  appointment  of  its  Regents,  and  in  the  adminis- 
tration of  its  affairs;  provided,  that  all  the  moneys 
"  derived  from  the  sale  of  the  public  lands  donated  to 
"this  State  by  Act  of  Congress,  approved  July  second, 
"  eighteen  hundred  and  sixty-two  (and  the  several  Acts 
"  amendatory  thereof),  shall  be  invested  as  provided  by 
"  said  Acts  of  Congress,  and  the  interest  of  said  moneys 
"  shall  be  inviolably  appropriated  to  the  endowment, 
"  support,  and  maintenance  of  at  least  one  college  of 
"  agriculture,  where  the  leading  objects  shall  be  (with- 
"  out  excluding  other  scientific  and  classical  studies, 
"  and  including  military  tactics),  to  teach  such  branches 
"  of  learning  as  are  related  to  scientific  and  practical 
"  agriculture  and  the  mechanic  arts,  in  accordance  with 
"  the  requirements  and  conditions  of  said  Acts  of  Con- 
gress; and  the  Legislature  shall  provide  that  if, 
"  through  neglect,  misappropriation,  or  any  other  con- 
"  tingency,  any  portion  of  the  funds  so  set  apart  shall 
"  be  diminished  or  lost,  the  State  shall  replace  such  por- 
"  tion  so  lost  or  misappropriated,  so  that  the  principal 
"  thereof  shall  remain  forever  undiminished.  No  per- 
"  son  shall  be  debarred  admission  to  any  of  the  colle- 
"giate  departments  of  the  University  on  account  of 
"sex." 

For  a  reason  hereafter  stated  the  Committee  do  not 
propose  to  attempt,   in   this  report,  to  construe  these 


—  8  — 

several  provisions  of  the  Constitution  with  reference 
to  each  other,  or  to  ascertain  their  true  meaning  and 
effect  when  read  together,  but  will  content  itself  with 
submitting  to  the  Board  such  suggestions  as  appear  to 
it,  upon  such  examination  as  it  has  been  able  to  bestow, 
to  be  pertinent  to  the  question  in  hand. 

Is  the  assumption  by  the  State  of  an  obligation  to 
make  good  any  losses  which  may  accrue  under  the 
new  method  of  investment  proposed — loaning  the 
''credit"  of  the  State — within  the  prohibition  of  the 
thirteenth  section  of  the  twelfth  article  of  the  Consti- 
tution :  "  The  State  shall  not  in  any  manner  loan  its 
credit"  ? 

Has  not  the  Federal  Government  proposed  in  the 
amendatory  Act  to  enlarge  the  methods  of  investment, 
because  it  is  content  to  rely  upon  the  " credit"  of  the 
State  pledged  to  make  good  any  loss  that  may  accrue 
by  the  new  character  of  investment  proposed  ?  And, 
except  for  the  supposed  "credit"  of  the  State  and  the 
confidence  of  the  Federal  Government  reposed  therein, 
would  that  government  have  probably  given  its  assent 
to  the  new  scheme  of  investment  ? 

Regarding  the  obligation  demanded  by  the  Federal 
Government,  and  attempted  to  be  assumed  by  the 
State,  as  a  contract  of  guaranty  or  suretyship,  is  not 
such  a  contract  necessarily  based  upon  the  "credit," 
real  or  supposed,  of  the  surety  or  guarantor  ? 

Is  it  possible  to  estimate  the  value  of  a  contract  of 
guaranty  or  suretyship  except  on  the  "credit"  of  the 
supposed  guarantor  or  surety  ? 

It  may  be  suggested,  upon  the  other  hand,  that  the 
University  of  California  is  to  be  regarded  as  a  portion 


of  the  State  government,  so  that  any  obligation  assumed 
by  the  State  in  connection  therewith  would  not  take  on 
the  character  of  a  loan  of  its  credit,  since  such  obliga- 
tion would  not  in  that  view  concern  any  other  debt  than 
the  debt  of  the  State  itself,  and  that  a  State  could  not 
be  said  to  loan  its  credit  when  it  only  bound  itself  to 
pay  its  own  debt.  Is  the  University  or  its  fund  to  be 
guaranteed,  in  this  sense,  a  part  of  the  State  govern- 
ment? Is  the  identity  of  the  State  government  affected 
by  the  circumstances  of  its  fostering  or  not  fostering  a 
State  University? 

Again:  to  whom  does  the  State  by  this  assumption 
place  itself  under  the  obligation  supposed  to  be  founded 
upon  the  loan  of  its  credit?  Does  that  obligation  run 
to  the  State  itself?  On  the  contrary,  does  it  not  run 
directly  to  the  Federal  Government  to  whom  the  prom- 
ise is  in  fact  made? 

Who,  as  promisee  in  this  obligation,  would  have  the 
right  to  complain  of  its  breach  except  the  Federal  Gov- 
ernment whose  donation  had  thereby  become  impaired 
or  lost?  It  may  be  suggested  with  much  plausibility 
that  we  have  here  a  promisor,  the  State,  and  a  prom- 
isee, the  Federal  Government,  and  a  contract  by  which 
the  State  pledges  its  "credit"  to  make  good  any  future 
losses  sustained  in  the  management  of  a  designated 
fund  to  be  employed  for  a  particular  purpose. 

Turning  again  to  the  ninth  clause  of  the  ninth  article, 
which  is  devoted  to  the  University  of  California,  let  us 
see  what  provision  is  found  there  which  can  be  fairly 
supposed  to  bear  upon  this  question. 

That  section  begins  by  placing  the  organization  and 
government  of  the  University,  as  prescribed  by  the  Act 


10  

of  March  23,  1868,  and  the  Acts  amendatory  thereof, 
substantially  beyond  legislative  control,  and  reserves  to 
the  Legislature  only  the  power  to  enact  such  laws  as 
may  be  necessary  to  insure  compliance  with  the  terms 
of  the  endowments,  and  the  proper  investment  and 
security  of  the  funds.  By  this  provision  the  independ- 
ence of  the  University,  except  in  the  respect  indicated 
is  practically  established. 

Does  the  reservation  of  the  legislative  power  to  pass 
such  lawrs  as  may  insure  compliance  with  the  terms  of 
the  endowments  and  the  prior  investment  and  security 
of  the  funds,  carry  with  it  by  fair  implication  a  power 
to  loan  the  credit  of  the  State  in  connection  therewith  ? 
If  some  person  were  now  to  propose  to  loan  to.  the 
University  of  California,  whose  independent  govern- 
ment and  organization  has  thus  been,  in  a  measure, 
established,  a  sum  of  money  to  be  used  by  it  to  further 
its  objects  and  purposes,  upon  condition  that  the  State 
should  become  a  surety  or  guarantor  against  the  loss  of 
such  funds,  .or  for  their  return  after  a  limited  time,  would 
not  such  a  proposition  amount  to  a  proposal  that  the 
State  should  loan  its  credit?  Again,  as  bearing  some- 
what upon  the  intention  of  the  framers  of  the  Constitu- 
tion, as  expressed  in  the  ninth  section  of  the  ninth 
article,  it  would  seem  that,  as  in  the  enactment  of  the 
Act  of  Congress  of  July  2d,  1862,  already  referred  to, 
the  possibility  of  a  change  in  the  terms  of  that  Act 
becoming  necessary  was  not  foreseen  or  contemplated, 
because  it  is  in  the  said  ninth  section  expressly  " pro- 
ied  that  all  the  moneys  derived  from  the  sale  of  the 
"  public  lands  donated  to  this  State  by  the  Act  of  Con- 
gress approved  July  2d,  1862.  (and  the  several  Acts 


T     T         

"  amendatory  thereof,)  shall  be  invested  as  provided  by 
"  said  Acts  of  Congress"  etc. 

And  it  might  be  suggested  that  so  far  from  there 
being  manifested  a  purpose,  on  the  part  of  the  framers 
of  the  Constitution,  that  the  State  might  loan  its  credit, 
in  connection  with  any  change  that  might  be  thereafter 
proposed  and  accepted,  in  the  terms  of  the  Act  of  Con- 
gress of  July  2d,  1862,  the  provision  is  that  that  Act 
shall  not  be  altered  at  all. 

Without  attempting  to  pursue  the  subject  further,  or 
to  express  an  opinion  as  to  what  should  be  the  con- 
struction of  the  Constitution  in  the  case  in  hand,  the 
Committee  submit  these  suggestions,  to  show  that  the 
question  cannot  be  said  to  be  entirely  free  from 
difficulty. 

The  consequences  to  the  University  of  a  possible 
misconstruction  are  too  serious  to  be  risked.  If  the 
funds  of  the  University  cannot  be  loaned  at  all,  the 
income  expected  therefrom  must  cease.  On  the  other 
hand,  if,  in  an  attempt  to  derive  an  income,. in  vestments 
should  be  made  not  authorized  by  law,  the  loss  to  the 
University  of  the  principal  sum  so  invested  is  possible. 
Either  consequence  would  be  of  such  an  unfortunate 
character  that  the  Committee  are  of  opinion  that  for 
the  present  no  investment  can  be  made  with  reasonable 
safety,  except  such  investment  pursue  the  terms  of  the 
Act  of  July  2,  1862,  as  originally  enacted,  and  that 
before  investments  shall  be  made  in  any  other  manner 
than  the  manner  prescribed  in  that  Act,  an  authorita- 
tive construction  of  the  Constitution  upon  the  points 
suggested  should  be  obtained  from  the  Supreme  Court 
of  the  State.  In  the  judgment  of  the  Committee,  no 


12  

other  construction  than  one  supported  by  the  official 
authority  of  that  tribunal  can  be  relied  upon  with  safety. 
For,  in  the  opinion  of  the  Committee,  so  many  consid- 
erations of  greater  or  less  force  and  plausibility  may  be 
fairly  brought  in  support  of  either  of  these  adverse 
views  as  to  the  true  interpretation  of  the  Constitution, 
that  it  will  require  the  judgment  of  the  Court  to  set 
the  question  at  rest. 

The  Committee  therefore  report  the  following  reso- 
lution for  the  consideration  of  the  Board  of  Regents  : 

Resolved,  That  the  attorney  of  the  Board  be  and  he 
is  hereby  directed  and  instructed  to  make  a  case  for  the 
purpose  of  bringing  before  the  Supreme  Court  of  the 
State,  in  a  proper  manner  for  decision,  the  question 
whether,  under  the  operation  of  the  legislation  of  Con- 
gress and  of  this  State  in  connection  with  the  pro- 
visions of  the  present  Constitution  of  this  State,  the 
Board  of  Regents  of  this  State  may  lawfully  invest 
that  portion  of  the  funds  of  the  University  derived  to 
it  under  the  Act  of  Congress  of  July  2,  1862,  in  secur- 
ities other  than  those  prescribed  in  the  said  Act  of  July 
2,  1862,  as  originally  enacted. 

WALLACE,  Chairman. 


NON-CIRCULATING  BOOK 


53343" 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


